- WTI price extends losses as the US Dollar improves due to increased risk-off sentiment.
- Oil traders wrestle with mixed signals regarding global demand concerns and rising expectations of the Fed reducing rates.
- Higher US Treasury yields support the strength of the Greenback.
West Texas Intermediate (WTI) Oil price continues to decline, driven by a widespread selloff in risk assets and a stronger US Dollar (USD). During the Asian session on Friday, WTI trades around $80.60 per barrel during the Asian session on Friday. Investors grapple with mixed signals regarding crude demand, amid concerns over a potential global economic slowdown and rising expectations that the Federal Reserve may soon lower interest rates.
US Initial Jobless Claims increased more than expected, data showed on Thursday, adding 243K new unemployment benefits seekers for the week ended July 12 compared to the expected 230K, and rising above the previous week’s revised 223K. Soft labor data, which enhances market expectations for a Federal Reserve (Fed) rate cut in September, which could spur more spending on Oil.
On Wednesday, Fed Governor Christopher Waller said that the US central bank is ‘getting closer’ to an interest rate cut. Meanwhile, Richmond Fed President Thomas Barkin stated that easing in inflation had begun to broaden and he would like to see it continue,” per Reuters.
Crude Oil prices may face challenges due to a slowing Chinese economy in the second quarter, which impacts demand from the world's largest Oil-importing country. On Thursday, Chinese leaders indicated that Beijing would maintain its current economic policies, but provided few specific details.
China's Third Plenary Session concluded on Thursday with a lack of concrete measures to revitalize the faltering economy, failing to alleviate demand concerns from the top Oil importer. A senior Chinese official for economic affairs noted that China's economic recovery is not robust enough and emphasized the need for more effective implementation of macroeconomic policies, according to Reuters.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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